LNG

UK major Shell is said to be finalizing the acquisition of liquefied natural gas assets of Pavilion Energy, the natural gas company set up by Singapore’s wealth fund Temasek, to give the Asian island state energy security.

European natural gas prices and US Gulf Coast last day futures for free-on-board cargoes from Louisiana and Texas increased for a second day after the Iranian drone and missile attacks on Israel brought more uncertainty and volatility into oil and gas markets.

First Gen Corp., the leading power company in the Philippines and a new liquefied natural gas importer, has awarded a cargo tender to Chinese major China National Offshore Oil.

Flex LNG, the Norwegian shipping company with a fleet of 13 vessels and several chartered to the largest exporters, posted solid net income and increased vessel operating revenues with all ships available after previous dry-dockings.

The United States government forecasts that the global liquefied natural gas markets in the current winter season would likely be balanced through to the end of March 2024 even as geopolitical, weather and other risks remained.

JERA Co. Inc., the largest Japanese liquefied natural gas buyer, and Korea Gas Corp. (Kogas), its counterpart in South Korea, have signed an accord to cooperate in the LNG business.

Japanese monthly LNG imports dropped by 5.4 percent year-on-year as costs increased by more than 50 percent and with the number of shipments from Asian nations and Australia rising as deliveries from other regions fell.

The November 2022 LNG shipments to Japan’s network of 37 terminals amounted to 5.55MT, or 82 cargoes, compared with 5.86MT, or 87 shipments, in November 2021, according to preliminary trade data from the Finance Ministry.

The deliveries last month were, however, higher than those in the previous month of October 2022 when they were 5.08MT.

Those October shipments had been higher by 9.9 percent than the October 2021 deliveries received.

The costs of the November LNG cargoes increased by 52 percent year-on-year to 750.52 billion yen ($5.48Bln) compared with the November 2021 costs of 494.77Bln yen ($3.61Bln), the Ministry data showed.

For the past six months, Japan has seen a record trade deficit for each month, as rising energy and raw material costs have pressured the economy.

While LNG imports fell in November deliveries of thermal coal for power generation also plummeted by 18.5 percent to 8.58MT.

The top eight suppliers of LNG to Japan have most recently been Australia with more than one-third of deliveries, Malaysia, Qatar, Russia, the US, Brunei and Papua New Guinea.

Cargo sources

The November shipments from Russia’s Sakhalin Island plant in the Far East fell 14.4 percent to 446,000 tonnes while deliveries from the US dropped by 52.2 percent versus November 2021 to 191,000 tonnes.

Shipments of LNG from Asia in November increased by 5 percent to 1.62MT.

The Ministry data also showed that Middle East deliveries were the biggest fallers by 54.2 percent to 484,000 tonnes.

The balance of imports and the biggest portion in November 2021 came from Australia with minor additions from African nations and the spot market.

That segment of the imports was well up at 2.81MT compared with 2.34MT in November 2021, though was less than the October 2022 combined import figure of 3.03MT.

Japan has also lagged in increasing nuclear power into the energy mix in 2022.

Since the Fukushima disaster, only 10 reactors have been given the go-ahead to go back into operation compared with the 54 that were online in 2011 and which supplied around 30 percent of Japan’s energy needs.

A further 21 reactors have been decommissioned since 2011 and will never be re-started. 

The European Union benchmark Dutch Title Transfer Facility price declined in the past week and was also lower than on the same day in 2021 as was the spot LNG cargo price for North Asian LNG as net withdrawals from EU gas storage increased amid colder weather and cargo demand from China, Japan and South Korea was steady.

Japanese trading houses and energy companies Mitsui & Co. and Mitsubishi Corp. have formally joined the new operating company for the Sakhalin II LNG export plant in the Russian Far East.

A Russian statement said Mitsui and Mitsubishi have taken stakes of 12.5 percent and 10 percent respectively in the new operating company, Sakhalinskaya Energia.

The former operating company Sakhalin Energy had Gazprom as the majority shareholder with 50 percent plus one share while Shell had 27.5 percent of the shares and Mitsui and Mitsubishi 12.5 percent and 10 percent, which they now hold in the new company.

Shell decided to withdraw from operations in Russia after the invasion of Ukraine, though its exit path from Sakhalin LNG is not clear and the shareholding could eventually revert to Gazprom.

After the Shell pull-out, Russian President Vladimir Putin ordered in June 2022 that the Sakhalin LNG company’s assets be expropriated and passed on to a new entity.

In the latest statement, the Russians cited Shell Chief Executive Ben van Beurden as saying on July 28: “It's highly unlikely that we will become a member of a Russian legal entity to which our share in Sakhalin Energy may be transferred. It's not consistent with our intention to keep our assets in Russia. It creates a little bit more uncertainty about how exactly we will exit.”

The Sakhalin plant began LNG exports in 2009 and has annual capacity from its two Trains of around 10 million tonnes per annum with shipments going to Japan and South Korea.

Concerns

The Japanese government has backed Mitsui and Mitsubishi in retaining their Sakhalin LNG stakes and officials were cited as saying that potential Chinese shareholders could replace the Tokyo-based companies.

“In accordance with the notification of Mitsubishi Corp. on the consent to take ownership of a share in the authorized capital it will be transferred to a fully owned subsidiary of Mitsubishi,” said the Russian statement.

The previous Mitsubishi share in the Sakhalin plant was held by its subsidiary Diamond Gas Sakhalin and a 10 percent stake has been passed to it.

The Russian statement added that the 12.5 percent stake of Mitsui had been transferred to a company subsidiary registered in Dubai in the United Arab Emirates and called MIT SEL Investment.

The new Sakhalinskaya Energia company was incorporated in the capital of Sakhalin Island, Yuzhno-Sakhalinsk, in August 2022 and Gazprom was assigned its majority shareholding from the previous operating company.

Japanese liquefied natural gas imports increased for a third successive month in June as they edged higher by 1.7 percent and year-on-year costs doubled while volumes increased from Asia, Australia and particularly Russia.